Banking shares mixed, ringgit firmer ahead of Bank Negara monetary policy tomorrow

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KUALA LUMPUR (Sept 17): Malayan Banking Bhd (Maybank) and Public Bank Bhd rose at afternoon noon break, while CIMB Group Holdings Bhd, Hong Leong Bank Bhd (HLB) and Alliance Financial Group (AFG) fell, ahead of Bank Negara Malaysia’s monetary policy committee (MPC) meeting tomorrow.

The outcome of the MPC meeting is closely watched, as investors anticipate whether Bank Negara will continue to raise the overnight policy rate (OPR) or maintain the existing 3.25% rate. The central bank had during its previous MPC meeting last July, raised the OPR by 25 basis points to 3.25% from 3% — the first hike in more than three years.

Today, Maybank rose three sen or 0.3% to RM9.95 at 12.30pm, while Public Bank rose two sen or 0.11% to RM18.98. However, CIMB fell seven sen or 0.98% to RM7.06, HLB shed four sen or 0.27% to RM14.60, while AFG fell one sen or 0.2% to RM4.96.

The ringgit strengthened to RM3.2185 against the US dollar today, from RM3.2285 yesterday and RM3.2290 last Monday.

This compares to RM3.1463 on Aug 27 this year — the firmest level in six months. The ringgit had traded at current levels against the greenback, on prospects of a US interest rate rise that had generated demand for the US-dollar.

Reuters reported that economists were split over whether Bank Negara would raise the OPR or hold the benchmark interest rate at current level. Eight out of 16 economists polled by Reuters, forecast the bank will opt for another increase of 25 basis points on Thursday, as stronger economic growth provided room for further action to temper household debt.

The other eight economists surveyed expected the central bank would keep rates on hold, citing as reasons, both disappointing exports and factory production data in July. As demand slows down from China and Japan, economists say the Malaysian central bank may refrain from raising rates too fast.

Today, MIDF Amanah Investment Bank Bhd wrote that it expected the OPR to remain unchanged until end of this year. MIDF said the OPR might be hiked early next year, to 3.5%.

MIDF said, with data on exports and IPI showing much weaker-than-expected readings for July, the consensus expectations indicated the OPR might stay unchanged, at least until before the next MPC meeting scheduled in November.

A Public Investment Bank analyst said it was not looking at an increase in the OPR, in the upcoming MPC meeting.

“Should there be an increase in the September MPC meeting, the property sector will take a temporary setback. It will also indicate that the Bank Negara thinks that the domestic economy is robust enough to weather this hike," the analyst said.